Bush budget may cut student aid program.

Byline: Greg Bolt The Register-Guard

A loan program that last year provided financial aid to more than 2,500 University of Oregon students could be in danger under the Bush administration's plan to restructure the way college aid is delivered.

The Perkins Loan program, which provides low-interest loans to students based on financial need, could be curtailed severely or eliminated depending on the precise details of the Bush budget and how Congress responds. The UO gave out more than $4.5 million in Perkins Loans last year and Lane Community College loaned almost $1 million.

Perkins Loans operate like a revolving account - as graduates repay loans, that money then goes into new loans for current students. The federal government in the past has added new revenue to the loan pool each year, and universities are required to provide matching amounts.

But this year Congress voted to stop making federal contributions to the program. And in remarks on his budget plan, President Bush has indicated that he may seek repayment of past allocations.

In return, Bush proposes to boost the size of the Pell Grant, the government's largest need-based financial aid program. The Bush plan calls for increasing the maximum Pell Grant, which does not have to be repaid, by $100 a year for five years, when it would top out at $4,550.

He also proposes raising the borrowing limit on Stafford Loans, the primary loan program used by the largest number of students, by $875 a year for freshmen to a total of $3,500.

Even with those increases, students with a $2,500 Perkins Loan would have almost $1,000 a year less in financial aid if the Perkins program is cut.

The Perkins Loan program would survive even if Congress decided not to renew federal contributions, although it would not grow and individual loans might decline as college costs increase. But if Bush decides to force colleges to repay what they already have received, loan payments that now are used to make new loans would go back to the federal treasury instead.

"The bulk of what we award is money that students repay, and that recycles out to new students who need money to go to school," said Elizabeth Bickford, the UO's financial aid director. "If we are required to send part of that repayment money back, that's going to cut into the money we have to reaward."

The Perkins Loan program is one of three federal aid programs, along with the work-study and Supplemental Educational Opportunity Grant program, aimed at helping low- and middle-income families cover the rising cost of college education. Perkins Loans are attractive because they can be awarded to borrowers without established credit histories.

Bert Logan, financial aid director at LCC, said the average Perkins Loan there is about $2,700. He said the net loss of tuition aid that could come with elimination of the loans would be a blow to students.

"That's a big deal for our high-need students," he said. "I don't feel good about that at all, and it's the wrong way for Congress to be thinking."

Perkins Loans and the other aid programs have been a target of some lawmakers, who consider them redundant alongside the much larger Stafford loan program. Many Republicans say that by increasing the Stafford Loan limit and boosting Pell Grants, the government can continue to offer generous aid programs for needy students without putting so much pressure on the burgeoning federal deficit.

College officials acknowledge the difficult budget situation but disagree that Perkins Loans are redundant. They say they reach students who can't get enough money from the larger aid programs to make college affordable and that boosting those other programs won't make up for the loss.

For now, though, it's not clear just how far Congress will go in reducing financial aid. Bickford said that's making it difficult for universities to estimate just what the impact will be and to plan accordingly.

"It appears as if we are gaining in one program and losing in another," she said. "But we just don't know how severe or what it will look like."

The budget proposals come at a time when Oregon is trying to increase college access through a proposal by Gov. Ted Kulongoski to double funding for the Oregon Opportunity Grant, the state's main need-based aid program.

If the Legislature approves the spending it would help offset the effects of any federal cuts. But at the same time, the loss of federal aid would mean the state money won't go as far as it would otherwise.

"It just further reinforces the need for the state to be able to put as much effort into what we're doing for our citizens as possible," said Margie Lowe, interim director of the Oregon Student Assistance Commission. "We can't rely on the resource being there at the federal level."